Union Trust Parent To Be Acquired

New Jersey Firm To Acquire Union Trust Parent

December 29, 1992|By JOANNE JOHNSON; Courant Staff Writer

The parent of Stamford-based Union Trust Co., Connecticut's third-largest commercial bank, has agreed to be acquired by the giant First Fidelity Bancorporation of New Jersey, bank officials said Monday.

First Fidelity, which is one of the nation's 25 biggest banking companies, plans to acquire troubled Northeast Bancorp Inc., one of Fairfield County's cornerstone banks, for about $29 million in an exchange of common stock next year, the banks' representatives said.

While the takeover would mark the latest in a string of acquisitions of Connecticut banks by companies in other states, analysts cheered the deal as one that would restore strength to New England's battered banking industry.

"Northeast's financial and managerial resources will be strengthened by First Fidelity's acquisition," said Stanley T. Wells, an analyst with Keefe Bruyette & Woods Inc. in Hartford.

"The good news for Connecticut and the rest of New England is that First Fidelity will be an added banking competitor with new sources of capital and with the potential to do additional acquisitions throughout the region," Wells said.

Analysts also said the deal is yet another sign of the increasing health of the region's banking industry. Most other large acquisitions in recent years here have followed bank failures and required government assistance.

Monday's announcement came only five days after sources said an acquisition deal with Shawmut National Corp., parent of Connecticut National Bank, fell apart.

Sources said Northeast rejected Shawmut's offer because the price was too low. Northeast, in its statement Monday, said Shawmut walked away from the deal. Shawmut declined to commment Monday.

First Fidelity officials said it is too early to say how many of Union Trust's 68 branches it expects to close or how many of its 1,600 staff positions it might eliminate as it consolidates the two banks' operations.

Because First Fidelity does not now have operations in

Connecticut, the company expects that branch and staff cutbacks "will not be significant," company spokesman Paul Levine said.

First Fidelity has not decided whether it will maintain the Union Trust name, Levine said.

The takeover of Northeast, which had sought a buyer for months in the wake of heavy losses, is contingent on its sale of about $130 million in problem commercial real estate and commercial assets to First Boston Corp.

Another condition of the acquisition is that Northeast separately sells about $30 million in troubled residential realestate assets. First Fidelity, which has more than $30 billion in assets, is New Jersey's largest bank.

Analysts described it as a well-managed bank with a reputation as an aggressive acquirer of other institutions.

First Fidelity recently has rebounded from heavy loan losses to regain enough strength to acquire several failed banks from which regulators skimmed bad loans.

After posting a loss of $6.1 million for 1990 and a slender profit of $221 million for 1991, First Fidelity earned $82.3 million in the third quarter of 1992 compared with a $55.3 million profit for the same time last year.

First Fidelity said Monday it decided to acquire Northeast because the company offered a natural extension of its 550-branch network in New Jersey, Pennsylvania and New York.

First Fidelity noted that Union Trust's operations, which are concentrated most heavily in Fairfield County, are contiguous to its own in New York's Westchester County.

"The opportunity to acquire Northeast Bancorp and Union Trust is particularly attractive," said Anthony Terracciano, First Fidelity's chairman and chief executive officer.

"Union Trust is a leading consumer bank in Fairfield County with 41 branches there and 27 offices in four other Connecticut counties. Additionally, Union Trust has a strong middlemarket commercial franchise and a highly regarded and growing trust business," Terracciano said.

Union Trust, which has $2.5 billion in assets, has been been battling for months to recover from heavy loan losses.

Under regulatory orders to boost its capital, the bank had been selling assets and streamlining operations.

The bank had earned $23.2 million in the third quarter compared with a loss of $1.8 million for the same period in 1991. For the full year of 1991 the company lost $17.2 million. It lost $58.8 million in 1990.

Union Trust said earlier this year that its problems remained serious enough that it would consider a merger with another company.

"The long recession and its particularly adverse impact on real estate values in New England had made it increasingly apparent that if Union Trust were to continue to grow, it needed a strong partner," Frank J. Kugler, Northeast chairman, said Monday.

"In First Fidelity, we have such a partner, one that is committed to investing capital and helping us continue our competitive banking tradition in our marketplace," Kugler said.